Family Foundation
⌂ /What Is a Family Foundation?
Main Objectives of a Family Foundation
According to the Act issued by the Ministry of Development and Technology, the primary purpose of a family foundation is to manage and protect assets, and to provide financial support to beneficiaries designated by the founder. The legislation grants the founder full discretion in determining the foundation’s purpose, governance structure, and operating principles.
For families engaged in business, the law supports the establishment of family governance, encourages investment in Poland, and facilitates capital accumulation. As a result, company assets remain under unified control, which ensures long-term security and creates a stable environment for investment and development across generations.
Establishing a Family Foundation
To establish a family foundation, the following steps must be taken:
- Submission of a declaration to establish the foundation, either in a founding deed or a will — both must be executed in the form of a notarial deed
- Drafting the foundation’s statute
- Preparing an inventory of assets, as specified in Article 26(1–4) of the Act
- Appointment of the foundation’s governing bodies as required by law or defined in the statute — these may include: the management board, supervisory board, and assembly of beneficiaries
- Contribution of the founding fund:
- If the foundation is established by founding deed — prior to registration
- If established by will — within two years of registration
- Registration of the foundation in the family foundation register
Who Can Be a Founder?
A founder may be an individual or group of individuals with full legal capacity, including the right to dispose of their assets. A foundation may be established for a definite or indefinite period. The law exempts the act of founding and transferring assets to the foundation from taxation.
The declaration of establishment may be made in a founding deed or a will. However, if the foundation is established by will, only one person may act as the founder.
What Rights Do Beneficiaries Have?
Beneficiaries of a family foundation may include:
- Natural persons
- Non-governmental organizations engaged in public benefit activities
The foundation may use its income and assets to finance expenses related to the maintenance, education, or medical care of individual beneficiaries. For non-governmental organizations, support will be directed toward funding their statutory objectives.
Accounting for Family Foundations – Key Principles
The accounting of a family foundation is based on general accounting principles, while also reflecting the specific nature of the foundation — particularly its core purpose and permitted business activities.
To ensure transparency and reliability, family foundations must adhere to established accounting and reporting standards.
Under the Accounting Act, a family foundation is classified as “another legal entity.”
Family foundations are subject to full accounting obligations and are taxpayers for both CIT and PIT. They must apply double-entry bookkeeping, meaning every financial transaction must be recorded in at least two accounts. This method allows for precise tracking and monitoring of all financial activities.
Before initiating accounting operations, the foundation must develop an accounting policy tailored to its structure, specifying which accounts will be used to record various financial transactions.
Integral components of the foundation’s accounting include financial statements, which consist of a balance sheet, profit and loss account, and supplementary notes.
Is a Family Foundation a Tool for Tax Optimization?
Establishing a family foundation comes with several notable tax benefits, including:
- No personal income tax (PIT) for beneficiaries in the zero tax group
- Exemption from inheritance and gift tax for beneficiaries
- Exemption from civil law transaction tax (PCC) when founding and transferring assets to the foundation
Given these advantages, many law firms and advisory companies have begun promoting family foundations primarily as tax optimization tools — often sidelining the original purpose for which the foundation was created. It is important to emphasize that a family foundation is intended to preserve and transfer wealth across generations, and should not be used solely to reduce tax liabilities.
The Head of the National Revenue Administration (KAS) has confirmed that tax optimization cannot be the primary objective of a family foundation. Improper use of this structure may result in consequences imposed by tax authorities. If irregularities are identified, the tax office may apply the general anti-avoidance rule (GAAR) and revoke any tax benefits.
In early 2025 alone, the Head of KAS refused to issue protective opinions in three cases involving family foundations. In each instance, entrepreneurs planned to transfer assets to a foundation, which would then sell them and distribute the proceeds to beneficiaries — resulting in significant tax savings.
In 2024, proceedings were initiated under the GAAR clause. This rule applies when tax avoidance is identified in a taxpayer’s actions. The Head of KAS may revoke the resulting benefits, determine the tax consequences, and impose penalties — including additional tax liabilities.
Taxation of Family Foundations
A family foundation is subject to corporate income tax (CIT) at a rate of 15%, which is payable only at the moment funds are distributed to beneficiaries. This deferred taxation means the foundation cannot deduct costs or apply asset depreciation.
Individual beneficiaries of a family foundation, as personal income tax (PIT) payers, are exempt from tax if they are the founder or the founder’s spouse, ascendants, descendants, siblings, stepchildren, stepfather, or stepmother. Other beneficiaries are subject to PIT at a rate of 15%.
For non-governmental organizations that are beneficiaries of a family foundation, CIT taxation remains unchanged, including the possibility of applying existing exemptions.
Business Activities of a Family Foundation
Under the law, a family foundation may conduct business activities only within the following scope:
1. Disposal of assets, provided the assets were not acquired solely for resale
2. Leasing, renting, or making assets available for use on another legal basis
3. Participation in commercial companies, investment funds, cooperatives, or similar entities, both domestic and foreign, and involvement in their operations
4. Acquisition and disposal of securities, derivatives, and similar rights
5. Granting loans to:
01
Capital companies in which the foundation holds shares or stocks
02
Partnerships in which the foundation is a partner
03
Beneficiaries
6. Foreign currency transactions for the purpose of making payments related to the foundation’s activities
7. Operating a business within an agricultural holding
Source: Article 3 of the Act of 6 March 2018 – Entrepreneurs’ Law (Journal of Laws 2021, items 162 and 2105; 2022, items 24, 974, and 1570), in conjunction with Article 6 of the Family Foundation Act
What Should a Family Foundation’s Accounting Policy Include?
Neither the Accounting Act nor the Family Foundation Act specifies the exact elements required in a foundation’s accounting policy. However, it is generally accepted that the policy should include:
- Objectives of the foundation’s accounting policy
- Rules for conducting permitted business activities
- Rules for recording benefits provided to beneficiaries, including:
- Accounting for free or partially paid benefits
- Proportional allocation for PIT purposes
- Recording of so-called hidden profits
- Priority rules for satisfying creditors who are not beneficiaries
- Information regarding:
- Inventory of assets contributed to the foundation, including the identity of contributors, the type and value of each asset (based on value and price at the time of contribution), and its tax value
- Beneficiaries of the foundation, their degree of kinship with the founder(s), and their entitlements
Accounting and PIT Taxation of Family Foundations
The PIT rate applicable to a family foundation depends on the relationship between the founder and the beneficiaries. As a rule, benefits received by beneficiaries are taxed at 15% of the taxable base at the time of payment. If assets are retained within the foundation and not distributed, PIT may be entirely avoided.
Read more: Upcoming changes to the Family Foundation Act – new tax regulations effective from 2025
Family Foundation and VAT
Is a family foundation a VAT taxpayer? Yes, it may be considered a VAT taxpayer and may benefit from available exemptions — both subjective and objective.
In several individual tax rulings, the Director of the National Tax Information confirmed that a family foundation may be recognized as a VAT taxpayer conducting business activity under Article 15(1) and (2) of the VAT Act, if it performs activities such as the supply of goods or services on a continuous and profit-oriented basis — regardless of the outcome of that activity (see rulings dated 5 October 2023, ref. 0114-KDIP1-3.4012.534.2023.1.LM, and 14 September 2023, ref. 0114-KDIP1-3.4012.488.2023.1.KP).
A family foundation is not required to register as a VAT taxpayer if its activities do not meet the criteria for business activity under the VAT Act.
Reporting Obligations of a Family Foundation
- A family foundation is required to prepare financial statements, as well as a statement of changes in equity (fund) and a cash flow statement (except in cases where the foundation qualifies as a micro or small entity).
- A family foundation does not prepare consolidated financial statements or an activity report.
- If the foundation meets the conditions specified in the Accounting Act, it is subject to mandatory audit by a certified auditor. The audit is preceded by a review of the foundation’s asset management, incurred liabilities, and public-law obligations, conducted by a team consisting of at least a certified auditor, a tax advisor, and an attorney-at-law or legal counsel.
- If the foundation does not meet the statutory thresholds regarding balance sheet total, net revenue, and average annual employment, it is not subject to mandatory audit by a certified auditor. In such cases, a review of the foundation’s asset management, incurred liabilities, and public-law obligations must be conducted at least once every four years.
The management board of the foundation submits the following documents to the court register maintained by the District Court in Piotrków Trybunalski:
- the approved financial statements, the audit report (if the statements were subject to audit), and
- a copy of the resolution of the assembly of beneficiaries approving the annual financial statements and deciding on profit distribution or loss coverage.
The above-mentioned documents must be submitted by the management board within 15 days from the date of approval of the annual financial statements.
Professional Accounting for Family Foundations
Family foundations are a new legal entity in Poland — the Family Foundation Act only came into force in 2023. Organizationally, foundations differ significantly from companies, so accounting firms must ensure their staff are trained not only in financial reporting but also in advising foundation management on optimal solutions.
Knowledge of the relevant industry and the specific relationships between individuals within the foundation is often essential.
Entrusting accounting to a firm that has not yet acquired expertise in the unique nature of family foundations may result in missed opportunities to fully leverage the benefits available to such entities. We encourage you to entrust your foundation’s accounting to Destrier Group, which integrates legal, accounting, and tax services under one roof. By combining these three areas, we provide top-tier accounting advisory and comprehensive financial management for family foundations.
Family Foundation Accounting – Our Offer
As part of our accounting and legal advisory services for family foundations, we offer:
- Assistance with foundation registration
- Drafting the foundation’s statute
- Preparing the inventory of assets
- Accounting advisory for family foundations
- Tax liability settlements
- Ongoing legal and accounting support
- Tax advisory services
Trust our experts and schedule a free consultation to discuss your needs.
